Correlation Between American Express and Western Union
Can any of the company-specific risk be diversified away by investing in both American Express and Western Union at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining American Express and Western Union into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and The Western Union, you can compare the effects of market volatilities on American Express and Western Union and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in American Express with a short position of Western Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Western Union.
Diversification Opportunities for American Express and Western Union
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between American and Western is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding American Express and The Western Union in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Union and American Express is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on American Express are associated (or correlated) with Western Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Union has no effect on the direction of American Express i.e., American Express and Western Union go up and down completely randomly.
Pair Corralation between American Express and Western Union
Assuming the 90 days trading horizon American Express is expected to generate 1.03 times more return on investment than Western Union. However, American Express is 1.03 times more volatile than The Western Union. It trades about 0.15 of its potential returns per unit of risk. The Western Union is currently generating about 0.0 per unit of risk. If you would invest 15,735 in American Express on October 12, 2024 and sell it today you would earn a total of 2,465 from holding American Express or generate 15.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 96.55% |
| Values | Daily Returns |
American Express vs. The Western Union
Performance |
| Timeline |
| American Express |
| Western Union |
American Express and Western Union Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Western Union
The main advantage of trading using opposite American Express and Western Union positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Western Union can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Western Union will offset losses from the drop in Western Union's long position.| American Express vs. Darden Restaurants, | American Express vs. New Oriental Education | American Express vs. Check Point Software | American Express vs. salesforce inc |
| Western Union vs. Take Two Interactive Software | Western Union vs. Cognizant Technology Solutions | Western Union vs. Marvell Technology | Western Union vs. Micron Technology |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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